- Consolidated Laws - Uniform Commercial Code
PART 4
PERFORMANCE OF LEASE CONTRACT: REPUDIATED,
SUBSTITUTED AND EXCUSED
Section 2-A-401. Insecurity: Adequate Assurance of Performance.
(1) A lease contract imposes an obligation on each party that the
other`s expectation of receiving due performance will not be impaired.
(2) If reasonable grounds for insecurity arise with respect to the
performance of either party, the insecure party may demand in writing
adequate assurance of due performance. Until the insecure party receives
that assurance, if commercially reasonable the insecure party may
suspend any performance for which he or she has not already received the
agreed return.
(3) A repudiation of the lease contract occurs if assurance of due
performance adequate under the circumstances of the particular case is
not provided to the insecure party within a reasonable time, not to
exceed thirty days after receipt of a demand by the other party.
(4) Between merchants, the reasonableness of grounds for insecurity
and the adequacy of any assurance offered must be determined according
to commercial standards.
(5) Acceptance of any nonconforming delivery or payment does not
prejudice the aggrieved party`s right to demand adequate assurance of
future performance.
Section 2-A-402. Anticipatory Repudiation.
If either party repudiates a lease contract with respect to a
performance not yet due under the lease contract, the loss of which
performance will substantially impair the value of the lease contract to
the other, the aggrieved party may:
(1) for a commercially reasonable time, await retraction of
repudiation and performance by the repudiating party;
(2) make demand pursuant to Section 2-A-401 and await assurance of
future performance adequate under the circumstances of the particular
case; or
(3) resort to any right or remedy upon default under the lease
contract or this Article, even though the aggrieved party has notified
the repudiating party that the aggrieved party would await the
repudiating party`s performance and assurance and has urged retraction.
In addition, whether or not the aggrieved party is pursuing one of the
foregoing remedies, the aggrieved party may suspend performance or, if
the aggrieved party is the lessor, proceed in accordance with the
provisions of this Article on the lessor`s right to identify goods to
the lease contract notwithstanding default or to salvage unfinished
goods (Section 2-A-524).
Section 2-A-403. Retraction of Anticipatory Repudiation.
(1) Until the repudiating party`s next performance is due, the
repudiating party can retract the repudiation unless, since the
repudiation, the aggrieved party has canceled the lease contract or
materially changed the aggrieved party`s position or otherwise indicated
that the aggrieved party considers the repudiation final.
(2) Retraction may be by any method that clearly indicates to the
aggrieved party that the repudiating party intends to perform under the
lease contract and includes any assurance demanded under Section
2-A-401.
(3) Retraction reinstates a repudiating party`s rights under a lease
contract with due excuse and allowance to the aggrieved party for any
delay occasioned by the repudiation.
Section 2-A-404. Substituted Performance.
(1) If without fault of the lessee, the lessor and the supplier, the
agreed berthing, loading, or unloading facilities fail or the agreed
type of carrier becomes unavailable or the agreed manner of delivery
otherwise becomes commercially impracticable, but a commercially
reasonable substitute is available, the substitute performance must be
tendered and accepted.
(2) If the agreed means or manner of payment fails because of domestic
or foreign governmental regulation:
(a) the lessor may withhold or stop delivery or cause the
supplier to withhold or stop delivery unless the lessee
provides a means or manner of payment that is commercially a
substantial equivalent; and
(b) if delivery has already been taken, payment by the means or
in the manner provided by the regulation discharges the
lessee`s obligation unless the regulation is discriminatory,
oppressive, or predatory.
Section 2-A-405. Excused Performance.
(1) Subject to Section 2-A-404 on substituted performance, the
following rules apply:
(a) delay in delivery or nondelivery in whole or in part by a
lessor or a supplier who complies with paragraph (b) and
subsection (2) is not a default under the lease contract if
performance as agreed has been made impracticable by the
occurrence of a contingency the nonoccurrence of which was a
basic assumption on which the lease contract was made or by
compliance in good faith with any applicable foreign or
domestic governmental regulation or order, whether or not the
regulation or order later proves to be invalid.
(b) if the causes mentioned in paragraph (a) affect only part of
the lessor`s or the supplier`s capacity to perform, he or she
shall allocate production and deliveries among his or her
customers but at his or her option may include regular
customers not then under contract for sale or lease as well
as his or her own requirements for further manufacture. He or
she may so allocate in any manner that is fair and
reasonable.
(2) The lessor seasonably shall notify the lessee and in the case of a
finance lease the supplier seasonably shall notify the lessor and the
lessee, if known, that there will be delay or nondelivery and, if
allocation is required under subsection (1) (b), of the estimated quota
thus made available for the lessee.
Section 2-A-406. Procedure on Excused Performance.
(1) If the lessee receives notification of a material or indefinite
delay or an allocation justified under Section 2-A-405, the lessee may
by written notification to the lessor as to any goods involved, and with
respect to all of the goods if under an installment lease contract the
value of the whole lease contract is substantially impaired (Section
2-A-510):
(a) terminate the lease contract (Section 2-A-505(2)); or
(b) except in a finance lease that is not a consumer lease,
modify the lease contract by accepting the available quota in
substitution, with due allowance from the rent payable for
the balance of the lease term for the deficiency but without
further right against the lessor.
(2) If, after receipt of a notification from the lessor under Section
2-A-405, the lessee fails so to modify the lease agreement within a
reasonable time not exceeding thirty days, the lease contract lapses
with respect to any deliveries affected.
Section 2-A-407. Irrevocable Promises: Finance Leases.
(1) In the case of a finance lease that is not a consumer lease the
lessee`s promises under the lease contract become irrevocable and
independent upon the lessee`s acceptance of the goods.
(2) A promise that has become irrevocable and independent under
subsection (1):
(a) is effective and enforceable between the parties, and by or
against third parties including assignees of the parties; and
(b) is not subject to cancellation, termination, modification,
repudiation, excuse, or substitution without the consent of
the party to whom the promise runs.
(3) This section does not affect the validity under any other law of a
covenant in any lease contract making the lessee`s promises irrevocable
and independent upon the lessee`s acceptance of the goods.
